When The Industry Evolves, Help Evolve the Industry

At the risk of stating the obvious, the media and entertainment industry is rapidly evolving. Technological innovations over the past decade have reshaped how and where consumers enjoy what used to be referred to as movies and TV shows, but is now called “premium video content.”

As a result, the industry’s economics – from the distribution platforms that are its bedrock to the advertising revenues that are its lifeblood – are undergoing a shift as well. I’ve spent the past couple days talking with two groups who understand this evolution better than most: investors at the publicly broadcast UBS Global Media and Communications Conference and Viacom’s 10,000 employees around the world, in an internal quarterly virtual town hall called “Bob Live.”

Both of these groups have a strong interest in understanding how Viacom is adapting to an increasingly digital and social future – and both might be forgiven for being somewhat skeptical. Not long ago, Viacom was trapped in what Harvard Business School’s Clayton Christensen dubbed “the innovator’s dilemma” – we were more focused on preserving and defending the traditional business we helped create, than we were in reinventing ourselves to adapt to a changing world.

But over the past two years, we’ve started transforming Viacom to not only adapt to these changes, but to get ahead of them. Not only have we stabilized and turned around the company, we are executing a strategy focused on the digital, experiential, data-driven future – and are well on our way to becoming a diversified, global, multi-platform supplier of quality branded content.

Last month, thanks to the hard work and dedication of our employees, partners and talent, Viacom reported strong fourth quarter and full-year 2018 earnings, capping a pivotal year in our company’s evolution. Total audience share increased. Paramount Pictures executed a turnaround in film and boosted its television business. Our international networks had another record year. Key revenue and income numbers improved.

As we enter a new year, we are continuing to move our business and our industry forward. Here are the three critical areas that I spoke about with investors on our recent earnings call, at the UBS conference, and with our employees at Bob Live.

1) Feeding the global content pipeline with the rise of our studio production business: Four years ago, Viacom made content primarily for one client: Viacom. No more.

Today, more content is being consumed than ever before, representing an incredible opportunity for companies, such as Viacom, that built their business on content creation. Research firm Ampere Analysis recently forecast that between them, Netflix and Amazon alone will spend more than $20 billion on content by 2023.

That’s why we are harnessing our global footprint, our understanding of diverse audiences, our vast collection of iconic intellectual property, our production expertise and our deep talent relationships to become a global content production machine. And not just for MTV, Nickelodeon, Comedy Central and the rest of our networks, but for any platform or channel in our increasingly content-hungry world.

You are already seeing Viacom everywhere, even when you may not realize it. When you watch The Haunting of Hill House or 13 Reasons Why on Netflix or Tom Clancy’s Jack Ryan on Amazon, you are watching a Paramount Television production. Netflix’s beloved summer rom-com To All the Boys I’ve Loved Before was the work of our newest acquisition, Awesomeness. MTV will soon relaunch its iconic MTV’s The Real World – on Facebook. Paramount just announced a deal to make movies for Netflix. And soon you’ll be seeing our Spanish programming via Viacom International Studios (VIS), which has done a series of deals across Latin American, U.S. Hispanic, and broader International markets, including two new Spanish- language series for Amazon announced just last month. Through VIS, Viacom has quickly become one of the top producers of original Spanish-language content in the world.

All told, we expect this to be a billion-dollar business for Viacom within a couple of years – a business that didn’t even exist four years ago.

2) Improving the viewer and client experience with the growth of our advanced advertising business: Advertising has changed as fast as any part of our industry – advertisers want to be sure their messages are actually reaching consumers in an increasingly noisy environment. Viacom has responded by developing products that stand out in a data-driven digital world.

We now have seven products in the market – across linear, branded content, influencer and shopper marketing, experiential and more – opening up new opportunities and strengthening the solutions we can provide to partners. We call this suite of products Advanced Marketing Solutions – or AMS. Think Whosay’s influencer and shopper marketing capabilities or our Vantage ad-targeting service – a product so powerful that one of our competitors, Fox, is licensing it from us.

Ad-targeting is especially important. We want to make sure that viewers see ads for the products that they are most interested in – a win for consumers and for our advertising partners. So, as we have renewed agreements with our partners at Charter, Altice and other carriers, we have added dynamic ad-targeting deals into these partnerships. Viacom is the only media company that is doing this.

3) Meeting viewers where they are: While it has been obvious for some time that the way in which people consume content is changing, it’s been less clear how to adapt to those changes.

But we started with the obvious anyway – be better partners to all of our distributors. That helped us secure and expand agreements with Comcast, Dish, Mediacom and others. Then we moved to more creative solutions – negotiating expanded partnerships so they included new areas of value, such as co-production of exclusive content and the advanced ad-targeting that I mentioned above. In most of these deals, we also made it easier for our cable partners to make our content available to their customers through video-on-demand (VOD) and “TV Everywhere” products. And consumers responded – Viacom’s brands grew their share of VOD transactions more than any other cable family in the fourth quarter, and also achieved strong growth in playtime – clearly showing our value to consumers.

For now, a television plugged into a cable box is still where the majority of people consume content. But as they migrate online to DirecTV Now, Sling, AT&T Watch and Philo, Viacom is also meeting them there. When they go to Twitter, YouTube, Snapchat or Facebook, Viacom Digital Studios is meeting them there. And when they subscribe to specialty products hosted on third-party platforms – think Noggin for kids, stuffed full of Nickelodeon content, now available on Amazon Prime Video and other platforms – we are meeting them there too.

We aim to be where our audiences are, and I’m proud to say we’re doing that in every way we can.

When I spoke with our employees today, I was joined live by Noah Centineo and, via video message, by Lana Condor, stars of To All The Boys I’ve Loved Before. I can’t imagine a better metaphor – these two young, talented and likeable stars and their summer hit represented Viacom’s future clearly: quality, talent-driven, Viacom-produced content pushed to a global audience.

As long as telling great stories with top talent to diverse audiences remains our focus, we couldn’t be more excited about Viacom’s future – and the future of all those affiliated with us, whether investor, employee, or fan.